Thinking of buying a home in the new year and have no idea how to budget for it? Whether you sold your home and are buying a new one, purchasing your first property or investing in first multi-family real estate, there are always some expenses you are going to incur as a buyer and knowing how to budget for them prepares you financially and allows you to make sound decisions throughout the purchasing process.
For the sake of examples, we will be using a purchase price of $500,000 for today’s calculations, now let’s see what your expenses look like!
1. Home Inspection
Regardless of the type of home you are buying or the experience you think you have in construction, a home inspection is an imperative part of the purchasing process that not only protects you from making a poor purchase, but also informs you on the property you are buying and how it works. Do we recommend you skip out on this step? absolutely not We strongly recommend spending your money on an inspection. The prices vary depending on the size of what you are purchasing, The average home inspection usually costs about $750 plus taxes
2. Notary fees
Trying to find a notary at a reduced cost is probably just as bad as trying to skip out on your inspection . Your notary takes care of reviewing important documents, verifying the certificate of location for any anomalies, guaranteeing all debts are paid on the property prior to transfer and essentially protecting the purchaser from a bad investment on all fronts. Cheaping out on this expense means skipped steps, and that means less protection for you. The good news? Regardless of the type of property you are purchasing or the size this expense is always around $1,600 – $1,850 all included.
3. Welcome Taxes
Ah, the famous land transfer tax. Here in Quebec, since 1992 all purchasers are obliged to pay a land transfer tax when purchasing a property or land in the province. Commonly known as the welcome tax, this is usually the most annoying of all expenses as it does not seem to serve any actual purpose to the home owners. Although you may not like it, the land transfer tax on a $500,000 home in most municipalities in Quebec is roughly $5,843. You can check out our website at groupebaronello.com for a calculation tool that helps you figure out how much your welcome tax would cost at any price point!
4. Moving Costs
Although only applicable to those either upsizing or downsizing, moving costs depend on many factors such as size of the move, distance of the move and time of the year. It is important to take into account the timing of your move if you want to try and save some of your hard earned money! Moving from a condo to a home in October might cost you roughly $1,000 whereas the same move in July might cost upwards of $2,000!
Unfortunately buying a home in the middle of the year does not mean you get away without paying your portion of municipal and school taxes When you arrive at the notary to purchase, the acting notary that you chose will actually prepare an adjustment sheet that exists to reimburse the vendor of any expenses that they may have incurred throughout the year where the responsibility should be transferred to the purchasers. This usually includes municipal and school taxes but is not limited to these two taxes and can include other items such as condo fee’s, propane tank rentals and refills, rent adjustments etc.
6. Down Payment
Definitely the most self explanatory expense in the buying process, your down payment! This depends on what you have decided to apply to your purchase and starts at a minimum of 5% no matter what you are buying and increases with the types of properties you are purchasing as well as the price tag. Although the minimum for condos, homes and land is 5% and increases based on price point, it is slightly different for revenu properties. The minimum down payment for a duplex is 5%, whereas the minimum down payment for a triplex or 4 unit is 10% and 5 or more units is 20%, regardless of their respective pricing.
7. Taxes on CMHC Insurance
Speaking of down payments… If your plan is to attribute less than 20% down payment on the property you are buying, that comes with an additional expense. While the actual CMHC insurance premium is usually baked into your mortgage amount, the tax on this amount cannot be financed, meaning you will have another up front cost at the notary equal to the provincial tax portion of your insurance premium! Basically an extra 9.975% of your insurance premium to be paid up front at the notary.
Let’s break down these expenses for you [based on a $500,000 purchase price]:
– Home Inspection = $862 (tax included)
– Notary fees = $1,800 (tax included)
– Welcome Tax = $5,843 (no taxes are applied)
– Moving Costs = $1,250 (taxes included, not peak season)
– Adjustments = $2,500 (based on July moving date, adjusting only municipal and school taxes)
– Down Payment = 20% = $100,000
– Tax on CMHC Insurance = N/A – 20% down used for calculation.
So you are thinking of buying a property and wanted to know what you needed to cover all your expenses, including our down payment? That number is looking something like $112,500. Not to worry though, If you find spending that number overwhelming and think you need some guidance, that is why we are here! If you are thinking of buying a home or condo in 2024 but do not want to go through the process alone, using a real estate broker is absolutely free!! Yup, you read that correctly, so stop hesitating and lets make the best investment of your life come true!